SEOUL (June 13): South Korea said on Thursday that the ban on short-selling of stocks will be extended for now, as the government focuses on developing a system to control illicit trading practices before resuming the trading strategy.

The Financial Services Commission (FSC) plans to set up by March next year, an electronic monitoring platform, first introduced in April to better detect naked-short sales, the regulator said after a meeting with the ruling party and related financial agencies.

The FSC said it would also revise short-selling rules to level the playing field between retail and institutional investors and strengthen fines on illicit trading practices, as announced in November.

Local Yonhap News reported that the ban is likely to stay until the end of March next year, without citing anyone.

The ban had been set to expire on June 30.

“The party requested that the current short-selling ban be extended until an electronic system is established,” the ruling People Power party said in a statement released after the meeting.

Short-selling, a practice involving borrowing shares and then selling them in the market, has been an unpopular trading strategy among South Korean retail investors and has been banned since November last year, as authorities vowed to root out illegal trading practices, including naked short-selling.

Global investors are closely monitoring South Korea’s short-selling rules, as critics blame the inability to place bearish bets as a hedging strategy for reduced transparency in the market.

“There is nothing good about extending the ban when the market is rising. It disturbs the supply-demand structure in the market, especially for foreigners, and makes it more difficult for South Korea to be included in MSCI’s developed market index,” a market analyst said, speaking on condition of anonymity.

Global index provider Morgan Stanley Capital International (MSCI), which categorises South Korea as an emerging market, last week downgraded the country”s short-selling accessibility in its annual review.

Uploaded by Liza Shireen Koshy